The Federal Reserve Bank of New York has asked a judge to
throw out a lawsuit by a former bank examiner who says she was dismissed after
finding fault with Goldman Sachs’ conflict-of-interest policies.

ProPublica reported
the allegations last month by Carmen Segarra, who the New York Fed had
assigned to examine aspects of Goldman Sachs in November 2011. She was fired seven
months later.

In its motion
to dismiss Segarra’s
lawsuit, the Fed disputed that she is a whistleblower and characterized
what transpired as “a non-actionable disagreement between a supervised employee
and more senior colleagues over how to interpret a Federal Reserve policy.”

Segarra had been hired as part of an effort by the New York
Federal Reserve to comply with new authority it received from Congress to
monitor so-called Too-Big-to-Fail financial institutions. The Fed recruited
experts to act as “risk specialists” to examine different aspects of these
complex firms.

Segarra, who previously had worked in some of the nation’s
largest banks, was tasked with examining legal and compliance functions at
Goldman. Her supervisors told her specifically to look at whether Goldman was
compliant with Fed guidance that the bank had a firm-wide conflict of interest
policy, according to her Oct. 10 complaint.

At the time, Goldman had been buffeted
by allegations in media reports and lawsuits over how it
handled conflicts of interest. Segarra determined that Goldman did not have
such a firm-wide policy. Although her fellow legal and compliance specialists
working at the other banks agreed with her findings, however, the Fed’s senior
official onsite at Goldman, Michael Silva, ultimately did not, according to her
complaint.

Silva and his deputy, Michael Koh,
tried to convince Segarra to change her findings, the lawsuit says. Three
business days after sending an email to them explaining that the evidence she
had gathered made it impossible for her to change her conclusions, Silva fired
her. Before being escorted from the building, Silva told her he had lost confidence
in her ability to follow directions and not to jump to conclusions, Segarra says.

Segarra’s suit
in U.S. District Court names as defendants the New York Fed, Silva, Koh
and her direct supervisor, Johnathan Kim. She alleged
wrongful termination, breach of employment contract and that the defendants
interfered with protected conduct she was exercising as a bank examiner.

Segarra’s lawsuit cites a federal law that allows bank
examiners to sue for wrongful termination if they are fired for providing
information regarding “any possible violation of any law or regulation, gross
mismanagement, a gross waste of funds, an abuse of authority, or a substantial
and specific danger to public health or safety.”

In its motion to dismiss, the New York Fed said that Segarra
worked “at will” and so there could be no “breach of contract.” It also said
that she was fired for cause and that the guidance she was told to use to
examine Goldman was advisory and not a regulation, so the bank could therefore
not be in violation. It further argued that since some of the information Segarra used to make her determination came from Goldman,
she technically did not “provide” it to the Fed.

In its filing, the Fed cited a Code
of Conduct policy and a 2011 Business
Standards Committee Report as evidence that Goldman had a firm-wide policy
governing conflicts of interest policy. Goldman, which is not a defendant in Segarra’s lawsuit, has said that it has such a policy.

“She rushed to judgments that even her own evidence
refuted,” the New York Fed’s motion said.

The 2011 Business Standards Committee Report the Fed cited
mentions plans to update and provide to all employees a conflict–of-interest
policy but does not detail policies or procedures. As for it its code of
conduct, Segarra told ProPublica that Goldman itself
did not believe it constituted a conflict of interest policy since it did not
provide it to regulators as such.

“My direct management and some of my peers did not think
Goldman's Code of Conduct was a conflicts-of-interest policy,” she told
ProPublica in an
interview. “Policies in banks are actually pretty standardized documents,
with clear titles and content directly related to the title/purpose of the
document, written in a language meant to be understood by every employee at
every level.”

Segarra’s attorney, Linda Stengel,
disputed the Fed’s contention that her client is not a whistleblower. “Obviously, Carmen is a whistleblower,
and obviously, her work as a bank examiner is protected conduct,” said Stengle. “Those conclusions are simple common sense to
most everyone, except FRBNY, apparently.”

Segarra’s complaint asked for
reinstatement, back pay, compensation for lost benefits and damages. The Fed’s motion rejected reinstatement
or damages, contending that Segarra “misappropriated and published confidential
supervisory information” as exhibits in her lawsuit.

9 comments

One has to wonder if this may be a case Ms. Segerra getting too close to what was happening in the seemingly too cozy relationship that the big banks/financial agencies enjoy with the Fed, who are, in part, supposed to regulate them? In the meltdown of 2008-2009, there was obviously wrong doing, but no one paid. The Dimond fellow walked away with a HUGE bonus!

Given the inbreeding between FRBNY and Goldman at the highest levels I would say that a finding in favor of Ms. Sagarra will be a shot across the bow of the Goldman-Sachs pirate ship, but I wouldn’t hold my breath, because Casino Wall Street is rigged and this fish stinks at the head.

It strikes me as interesting that the new policy in every field, today, is to prevent people from talking about real issues.

Why would the Fed be involved, here? Because they think the very discussion is dangerous to what they do.

Did anybody see the article last week that Wall Street is terrified of Elizabeth Warren running for President? They’re not afraid of her winning. They’re just afraid that she’ll get involved in the primaries. With her on the “left” and a Rand Paul on the “right,” the other candidates might be forced to talk about Wall Street policy in public.

Think about that, and think about how aggressive Washington has been in trying to stop whistle-blowers. Segarra has her work cut out for her, and I wish her luck, for all our sakes.

Let’s see. When Sanford Weill headed Traveler’s and Jamie Dimon was his light-duty kid, his acquisition of Citi only made sense if Glass-Steagall went away. Guess the deal was done (on many important fronts) because they closed their deal month’s prior to Congress closing down Glass-Steagall.

Look. The only real reason I’m pissed is that I didn’t get that interview with Goldman back in the early eighties -I think their offices were on Gold Street- and I didn’t put away enough for a place on St. Bart’s; nonetheless, outta pique or not, the only real answer is to elect Elizabeth Warren and to bring back Glass-Steagall (only call it something different like “The Stop Wall St. From Fucking US Law”)

I’m not a gambler, but would wager that the courts will protect the Feds as they do the NSA. Hope I lose and that Ms. Segarra prevails as more than a Don Quixote. She deserves the respect of all Americans who believe in basic human decency.

Safeguard the public interest

Republish This Story for Free

Thank you for your interest in republishing the story. You are are free republish it so long as you do the following:

You can’t edit our material, except to reflect relative changes in time, location and editorial style. (For example, "yesterday" can be changed to "last week," and "Portland, Ore." to "Portland" or "here.")

If you’re republishing online, you have to link to us and to include all of the links from our story, as well as our PixelPing tag.

You can’t sell our material separately.

It’s okay to put our stories on pages with ads, but not ads specifically sold against our stories.

You can’t republish our material wholesale, or automatically; you need to select stories to be republished individually.